CHAPTER I SCOPE OF THE AGREEMENT

Article 1

PERSONSCOVERED
This Agreement shall apply to persons who are residents ~f one or both of the Contracting States. '

Article 2 TAXES COVERED 1 This Agreementshall applyto taxes on incomeimposedon behalf of a ContractingState or of its political subdivisionsor local authorities,irrespectiveof the mannerin which they are levied. There shall be regardedas taxes on income all taxes impos.edon total income, or on elements of income, including taxes on gains from the alienation of movable or immovableproperty, taxeson the total amounts wagesor salaries of paid by enterprises.

3.

The existing taxesto which the Agreement shall applyarein particular: a)

in Bahrain to income tax payable under Amiri Decree No. 22/1979 ("The Oil Tax") (hereinafter referred to as "Bahrain Tax") j

b)

in Turkey: i) the incometax; and ii) the corporationtax (hereinafter referredto as "Turkish tax").

The Agreement shall apply also to any identical or substantiallysimilar taxes that are imposed after the date of signatureof the Agreementin addition to, or in place of, the existing taxes.The competent authoritiesof the ContractingStatesshall notify eachother of any significant changesthathave beenmadein their respectivetaxationlaws.

CHAPTER II

DEFINITIONS
Article 3 GENERAL DEFINITIONS For the purposesof this Agreement, unlessthe contextotherwiserequires:

2. 1.

Article 4

REsmENT
1.
For the purposes of this Agreement, the tenn "resident of a Contracting State" means:

(a)

in the case of Bahrain, an individual who is a national of Bahrain and who is present in Bahrain for a period or periods totalling in the aggregate at least 183 days in the fiscal year concerned, and a company or other legal person which is incorporated or has its place of managementin Bahrain.

(b)

in the caseof Turkey, any personwho, underthe laws of Turkey, is liable to tax therein by reasonof his domicile, residence, legal head office, place of management, any other criterionof a similar nature; or

This teffil., however, does not include any person who is liable to tax in a Contracting State in respect only of income or capital gains from sources in that State.

Where by reasonof the provisions of paragraphI an individual is a resident of both ContractingStates, then his statusshall be detennined follows: as
a) he shall be deemed to be a resident only of the State in which he has a permanent home available to him; ifhe has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests);

b) if the Statein which he has his centreof vital interestscannotbe determined,or ifhe has not a permanent home availableto him in eitherState,he shall be deemedto be a residentonly of the Statein which he hasan habitualabode; c) if he has an habitual abodein both Statesor in neitherof them, he shall be deemedto be a residentonly of the Stateof which he is a national; d) if he is a national of both Statesor of neitherof them,the competent authoritiesof the ContractingStatesshall settlethe questionby mutual agreement. Where by reasonof the provisions of paragraph a personother than an individual is a 1 resident of both Contracting States, then it shall be deemedto be a resident of the ContractingStatein which its place of effective management situated.However, where is suchpersonhas its place of effective management one of the Statesand its legal head in office in the other State, then the competentauthoritiesof the Contracting Statesshall consult to determineby mutual agreement whetherthe legal headoffice of sucha person hasto be consideredasthe actualplaceof effective management not. or

3.

Article 5

PERMANENT ESTABLISHMENT

1.

For the purposes of this Agreement, the term "permanent establishment" means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

The teml"pennanent establishment" includes especially: a) a place of management; b) a branch; c) an office; d) a factory; e) aworkshop;
f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources;

g) a refinery; h) a salesoutlet; and i) a warehouse relationto a person in providing storage facilities for others.

3.
4.

A building site or construction or installation project constitutes a pennanent establishment only if it lastsmore than 9 months; Notwithstanding the preceding provisions of this Article, the term "pennanent establishment" shall be deemed to include: not a) the use of facilities solely for the purposeof storage,display or delivery of goods or merchandise belongingto the enterprise; b) the maintenance a stock of goods or merchandise of belonging to the enterprise solely for the purposeof storage,displayor delivery; c) the maintenanceof a stock of goods or merchandise belonging to the enterprise solely for the purposeof processing another by enterprise; d) the maintenance a fixed place of businesssolely for the purposeof purchasing of goods or merchandise of collectinginformation, for the enterprise; or e) the maintenance a fixed placeof businesssolely for the purposeof carrying on, of for the enterprise,any other activity of a preparatory auxiliary character; or

2.

f) the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs a) to e), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.

5 Notwithstanding the provisions of paragraphs 1 and 2, where a person -other than an

agent of an independent status to whom paragraph 6 applies -is acting in a Contracting State, on behalf of the enterprise of the other Contracting State, the enterprise shall be deemed to have a pennanent establishment in the first mentioned Contracting State, if such a person: a) has and habitually exercises in the first -mentioned State, an authority to conclude contracts on behalf of the enterprise; unless his activities are limited to the purchase of goods or merchandise for the enterprise; and

b) has no such authority, but habitually maintainsin the first -mentioned State a stock of goods or merchandisebelonging to the enterprise from which he regularly fills ordersor makesdeliverieson behalf of the enterprise. An enterprise of a Contracting State shall not be deemed to have a pennanent establishment the other ContractiIigStatemerelybecause carries on businessin that in it other State through a broker, general commission agent or any other agent of an independent status,provided that such persons acting in the ordinary courseof their are business. The fact that a company which is a resident of a Contracting State controls or is controlled by a companywhich is a residentof the other Contracting State, or which carries on businessin that other State (whetherthrough a permanentestablishmentor otherwise),shall not of itself constituteeither companya permanent establishment the of other.

CHAPTER m
TAXAllON OF INCOME
Article 6 INCOME FROM IMMOVABLE PROPERTY

1.

Income derived by a residentof a ContractingStatefrom immovableproperty (including income from agriculture or forestry) situatedin the other ContractingState may be taxed in that otherState. The term "immovableproperty" shall have the meaning,which it hasunder the law of the ContractingStatein which the propertyin questionis situated. The term shall in any case include property accessoryto immovable property, livestock and equipment used in agriculture (including the breeding and cultivation of fish) and forestry, rights to which the provisions of general law respectinglanded property apply, usufruct of immovable property and rights to variable or fixed paymentsas consideration the working of, or for the right to work, mineral deposits,sources and othernaturalresources; ships and aircraft shall not be regardedasimmovableproperty.
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7. 6.

2.

However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed:

a) 10 per cent of the gross amount of the dividends if the beneficial owner is a company(otherthan a partnership) which holds directly at least25 per cent of the capital of the company paying the dividends;and b) 15 per centof the grossamountof the dividendsin all othercases 3
The tenIl "dividends" as used in this Article means income from shares, "jouissance" shares or "jouissance" rights, mining shares, founders' shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from sharesby the laws of the State of which the company making the distribution is a resident.

4.

Profits of a companyof a ContractingStatecarrying on business the otherContracting in State through a permanentestablishment situatedthereinmay, after having been taxed underArticle 7, be taxed on the remaining amountin the ContractingStatein which the permanentestablishment situatedand in accordance is with the provisionof domestic law of that State. The provisions of paragraphs1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the companypaying the dividendsis a resident,through a permanent establishmentsituated therein, or performs in that other State independent personalservicesfrom a fixed basesituatedtherein, and the holding in respectof which the dividends are paid is effectively connectedwith such permanentestablishmentor fixed base. In such casethe provisionsof Article 7 or Article 14, as the case may be, shall apply.
Subject to the provision of paragraph 4 of this Article, where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

5.

6.

Article II

INTEREST

1.

Interestarising in a ContractingStateand paid to a residentof the other ContractingState may be taxed in that otherState.

Subject to the provisions of paragraph 4 of Article 10, the taxation on a permanent establishment, which an enterprise of a Contracting State has in the other Contracting State, shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities.

Except where the provisions of paragraph of Article 9, paragraph of Article 11. or 1 6 paragraph6 of Article 12, apply. interest.royalties and other disbursements paid by an enterpriseof a ContractingStateto a residentof the other ContractingStateshall. for the purpose of determining the taxable profits of such enterprise.be deductible under the sameconditionsasif they had beenpaid to a resident the first mentioned of State.
Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to .any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State are or may be subjected. These provisions shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents.

4.

Article 24 MUTUAL AGREEMENT PROCEDURE

1.

Where a residentof a ContractingStateconsidersthat the actionsof one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective of the remediesprovided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a residentor, if his casecomesunder paragraph1 of Article 23, to that of the ContractingStateof which he is a national. The competentauthority shall endeavour, the objectionappears it to be justified and if to if it is not itself able to arrive at a satisfactorysolution, to resolvethe case by mutual agreement with the competentauthorityof the otherContractingState,with a view to the avoidanceof taxation,which is not in accordance with the Agreement.
The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Agreement. They may also consult together for the e11m1nation double taxation in of cases not provided for in the Agreement.

3.

4.

The competentauthorities of the Contracting Statesmay communicatewith each other directly for the purpose of reaching an agreementin the sense of the preceding paragraphs. When it seems advisable in order to reach agreementto have an oral exchange opinions, suchexchange of maytake placethrough a Commission consistingof representatives the competent of authoritiesof the.ContractingStates. 16

Article 25 EXCHANGE OF INFORMATION 1 The competentauthorities of the Contracting Statesshall provide assistancethrough exchange of information that is foreseeably relevant to the administration and enforcementof the domestic laws of the ContractingStatesconcerningtaxes of every kind and descriptionimposed on behalf of the ContractingStates,or of their political subdivisionsor local authorities,insofar as the taxationthereunder not contrary to the is Agreement.Suchinformation shall include informationthat is foreseeably relevantto the determination,assessment collection of suchtaxes,the recoveryand enforcementof and tax claims, or the investigation or prosecutionof tax matters. Information shall be exchangedin accordancewith the provisions of this Article and shall be treated as confidential in the manner provided in paragraph7 of this Article. The rights and safeguardssecuredto personsby the laws or administrativepractice of the requested Stateremain applicableto the extent that they do not unduly prevent or delay effective exchange information. of A requestedState is not obligated to provide infonnation, which is neitherheld by its authorities nor in the possessionor control of personswho are within its territorial jurisdiction.

3.

For the purposes this Article: of a) the term "publicly traded company"meansany company whoseprincipal class of sharesis listed on a recognisedstock exchange provided its listed sharescan be readily purchasedor sold by the public. Sharescan be purchasedor sold "by the public" if the purchaseor saleof shares not implicitly or explicitly restricted to is a limited groupof investors; b) the term "principal class of shares" means the class or classes of shares representing majority of the voting power andvalue of the company; a
c) the teml "recognised stock exchange" means any properly regulated stock exchange, which publicly trades shares and shall specifically mean in the case of Bahrain, the Bahrain Stock Exchange and in the case of Turkey, the Istanbul Stock Exchange;

d) the tenn "collective investmentfund or scheme"means any pooled investment vehicle, irrespectiveof legal fonn. The tenn "public collective investmentfund or scheme" means any collective investmentfund or schemeprovided the units, sharesor other interestsin the fund or schemecan be readily purchased,sold or redeemed the public. Units, shares other interests the fund or schemecan by or in be readily purchased,sold or redeemed"by the public" if the purchase,sale or redemptionis not implicitly or explicitly restrictedto a limited groupof investors; 17

2.

publicly traded companies or public collective investment funds or schemes unless such information can be obtainedwithout gi~g rise to disproportionate difficulties.
e)

The competent authority of the Applicant State shan provide the following information to the competent authority of the request~dState when making a requestfor information underthis Article to demonstrate foreseeable the relevance of the informationto therequest: (i) the identity of the personunderexamination invesqgation; or (ii) a statementof the information soughtincluding i~ nature and the form in
which the Applicant State wishes to receive the infor$lation from the requested State; I

(iii) the tax purposefor which the informationis sought; (iv) grounds for believing that the information requested held in the requested is State or is in the possession control of a personwithin the jurisdiction of or the requested State; (v)
to the extent known, the name and address of any person believed to be in possession of the requested information;

(vi) a statementthat the requestis in conformity with the law and administrative practicesof the applicant State,that if the requestedinformation was within the jurisdiction of the applicant State then the competent authority of the applicantStatewould be able to obtainthe infonnation underthe laws of the applicantStateor in the nonnal courseof administrativepractice and that it is in confortnity with this Article; (vii) a statement the Applicant Statehaspursuedall means availablein its own that territory to obtain the information, except those that would give rise to disproportionate difficulties.

f)

The competent authority of the requestedState shall forward the requested information as promptly as possibleto the Applicant State.To ensurea prompt response, competentauthorityof the requested the Stateshall: i) Confinn receipt of a requestin writing to the competent authority of the applicantStateand shall notify the competentauthority of the applicant State of deficiencies in the request,if any, within 60 days of the receipt of the request. ii) If the competentauthorityof the requested Statehasbeenunableto obtain and provide the information within 90 daysof receiptof!the request,including if it encounters obstaclesin furnishing the information 6r it refusesto furnish the information, it shall immediately inform the applicant State, explaining the reasonfor its inability, the natureof the obstacles the reasonsfor its refusal. or

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the applicant State, or any requirementconnectedtherewith, which discriminates againsta national of the requested Stateas compared with a national of the applicant Statein the samecircumstances.
7 Any infonnation received by a Contracting State under this Article shall be treated as confidential and may be disclosed only to persons or authorities (including courts and administrative bodies) in the jurisdiction of the Contracting State concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the detennination of appeals in relation to, the taxes covered by this Agreement. Such persons or authorities shall use such infonnation only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. The infonnation may not be disclosed to any other person or entity or authority or any other jurisdiction without the express written consent of the competent authority of the requested State.

8.

Incidence of costs incurred in providing assistance shall be agreedby the Contracting States.

Article 26
ANTI -A VOmANCE MEASURES

1.

The Provisionsof Articles 10,11 and 12 which conferan exemptionfrom, or a reduction in tax shall not apply if income arising in a ContractingState is received by a person (otherthan an individual) that is a residentof the otherContractingStateand one or more persons who are not residentsof that otherContractingState; a) have directly or indirectly or through one or more person, wherever resident, a substantialinterestin suchperson,in the form of a participationor otherwise;or b) exercisedirectly or indirectly, alone or together,the management control of such or person.

2.

A substantialinterestshall be deemed exist when at least25 percentof the capital stock to of the companyis so held.

Article 27 MEMBERS OF DIPLOMATIC l\flSSIONS AND

CONSULAR POSTS
Nothing in this Agreementshall affect the fiscal privileges of membersof diplomatic missions and consularpostsunderthe generalrules of internationallaw or underthe provisionsof special agreements.

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CHAPTER V FINAL PROVISIONS Article 28 ENTRY INTO FORCE Each of the Contracting Statesshall notify to the other, through thd diplomatic channelsthe completion of the proceduresrequired by its domesticlaw for the bhnging into force of this Agreement.This Agreementshall enterinto force on the dateof the litter of thesenotifications and its provisionsshall have effect for taxeswith respect everytaxaijle period beginningon or to after the first day of Januaryof the year following thatof entryinto foroeof the Agreement. Article 29
TE Rl\fiN A TI 0 N

This Agreementshall remain in force until terminatedby a ContractingState.Either Contracting Statemay temrinatethe Agreement,throughdiplomaticchannels, giving notice oftennination by at least six monthsbefore the end of any calendaryear following after the period of five years from the date on which the Agreemententersinto force. In suchevent,the Agreement shall cease to have effect for taxes with respect everytaxableperiodbeginningon or afterthe first day of to Januaryof the year following that in which the notice is given.

IN WITNESS Agreement.

WHEREOF,

the undersigned duly authorized hereto, have signed the present

Done in duplicate at M~Nt\.M8.. this l.J:f:.tb day of .N.a)/~1Y1~~H 2005, in the Arabic, Turkish, and English Languages,all three texts being equally authentic. hI case of divergencebetweenthe texts, the English text shallbe the operativeone.

For the Government of the Kingdom of Bahrain

For the Government of the Republic of Turkey

H.E. Ahmed bin Mohammed AI Khalifa Minister of Finance

H.E. Mr. Kiir~at Tiizmen Minister of State

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